GovernmentType: Islamic republic.Constitution: Ratified December 1979, revised 1989.Branches: Executive--"Leader of the Islamic Revolution" (head of state); president and Council of Ministers. Legislative--290-member Islamic Consultative Assembly (Majles). Judicial--Supreme Court.Political parties: The following organizations appeared to have achieved considerable success at elections to the sixth Majles in early 2000: Assembly of the Followers of the Imam's Line, Freethinkers' Front Islamic Iran Participation Front, Moderation and Development Party, Servants of Construction Party, and Society of Self-sacrificing Devotees. Administrative subdivisions: 28 provinces.Suffrage: Universal at 15.

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PEOPLEAlmost two-thirds of Iran's people are of Aryan origin--their ancestors migrated from Central Asia. The major groups in this category include Persians, Kurds, Lurs, and Baluchi. The remainder are primarily Turkic but also include Arabs, Armenians, Jews, and Assyrians.

The 1979 Islamic revolution and the war with Iraq transformed Iran's class structure politically, socially, and economically. In general, however, Iranian society remains divided into urban, market-town, village, and tribal groups. Clerics, called mullahs, dominate politics and nearly all aspects of Iranian life, both urban and rural. After the fall of the Pahlavi regime in 1979, much of the urban upper class of prominent merchants, industrialists, and professionals, favored by the former Shah, lost standing and influence to the senior clergy and their supporters. Bazaar merchants, who were allied with the clergy against the Pahlavi shahs, have also gained political and economic power since the revolution. The urban working class has enjoyed somewhat enhanced status and economic mobility, spurred in part by opportunities provided by revolutionary organizations and the government bureaucracy.

Unemployment, a major problem even before the revolution, has many causes, including population growth, the war with Iraq, and shortages of raw materials and trained managers. Farmers and peasants received a psychological boost from the attention given them by the Islamic regime but appear to be hardly better off in economic terms. The government has made progress on rural development, including electrification and road building but has not yet made a commitment to land redistribution.

Most Iranians are Muslims; 89% belong to the Shi'a branch of Islam, the official state religion, and about 10% belong to the Sunni branch, which predominates in neighboring Muslim countries. Non-Muslim minorities include Zoroastrians, Jews, Baha'is, and Christians.

HISTORYThe ancient nation of Iran, historically known to the West as Persia and once a major empire in its own right, has been overrun frequently and has had its territory altered throughout the centuries. Invaded by Arabs, Seljuk Turks, Mongols, and others--and often caught up in the affairs of larger powers--Iran has always reasserted its national identity and has developed as a distinct political and cultural entity.

Archeological findings have placed knowledge of Iranian prehistory at middle paleolithic times (100,000 years ago). The earliest sedentary cultures date from 18,000-14,000 years ago. The sixth millennium B.C. saw a fairly sophisticated agricultural society and proto-urban population centers. Many dynasties have ruled Iran, the first of which was under the Achaemenians (559-330 B.C.), a dynasty founded by Cyrus the Great. After the Hellenistic period (300-250 B.C.) came the Parthian (250 B.C.-226 A.D.) and the Sassanian (226-651) dynasties.

The seventh century Arab-Muslim conquest of Iran was followed by conquests by the Seljuk Turks, the Mongols, and Tamerlane. Iran underwent a revival under the Safavid dynasty (1502-1736), the most prominent figure of which was Shah Abbas. The conqueror Nadir Shah and his successors were followed by the Zand dynasty, founded by Karim Kahn, and later the Qajar (1795-1925) and the Pahlavi dynasties (1925-1979).

Modern Iranian history began with a nationalist uprising against the Shah (who remained in power) in 1905, the granting of a limited constitution in 1906, and the discovery of oil in 1908. In 1921, Reza Khan, an Iranian officer of the Persian Cossack Brigade, seized control of the government. In 1925, he made himself Shah, ruling as Reza Shah Pahlavi for almost 16 years and installing the new Pahlavi dynasty.

Under his reign, Iran began to modernize and to secularize politics, and the central government reasserted its authority over the tribes and provinces. In September 1941, following the Allies' (U.K.-Soviet Union) occupation of western Iran, Reza Shah was forced to abdicate. His son, Mohammad Reza Pahlavi, became Shah and ruled until 1979.

During World War II, Iran was a vital link in the Allied supply line for lend-lease supplies to the Soviet Union. After the war, Soviet troops stationed in northwestern Iran not only refused to withdraw but backed revolts that established short-lived, pro-Soviet separatist regimes in the northern regions of Azerbaijan and Kurdistan. These were ended in 1946. The Azerbaijan revolt crumbled after U.S. and UN pressure forced a Soviet withdrawal and Iranian forces suppressed the Kurdish revolt.

In 1951, Premier Mohammed Mossadeq, a militant nationalist, forced the parliament to nationalize the British-owned oil industry. Mossadeq was opposed by the Shah and was removed, but he quickly returned to power. The Shah fled Iran but returned when supporters staged a coup against Mossadeq in August 1953. Mossadeq was then arrested by pro-Shah army forces.

In 1961, Iran initiated a series of economic, social, and administrative reforms that became known as the Shah's White Revolution. The core of this program was land reform. Modernization and economic growth proceeded at an unprecedented rate, fueled by Iran's vast petroleum reserves, the third-largest in the world.

In 1978, domestic turmoil swept the country as a result of religious and political opposition to the Shah's rule and programs--especially SAVAK, the hated internal security and intelligence service. In January 1979, the Shah left Iran; he died abroad several years after.

On February 1, 1979, exiled religious leader Ayatollah Ruhollah Khomeini returned from France to direct a revolution resulting in a new, theocratic republic guided by Islamic principles. Back in Iran after 15 years in exile in Turkey, Iraq, and France, he became Iran's national religious leader. Following Khomeini's death on June 3, 1989, the Assembly of Experts--an elected body of senior clerics--chose the outgoing president of the republic, Ali Khamenei, to be his successor as national religious leader in what proved to be a smooth transition.

In August 1989, Ali Akbar Hashemi-Rafsanjani, the speaker of the National Assembly, was elected President by an overwhelming majority. He was re-elected June 1993, with a more modest majority; some Western observers attributed the reduced voter turnout to disenchantment with the deteriorating economy. (Ali) Mohammad Khatami-Ardakani, elected President in August 1997 with an overwhelming majority, was re-elected, again with a majority in June 2001.

GOVERNMENT The December 1979 Iranian constitution defines the political, economic, and social order of the Islamic republic. It declares that Shi'a Islam of the Twelver (Jaafari) sect is Iran's official religion. The country is governed by secular and religious leaders and governing bodies, and duties often overlap. The chief ruler is a religious leader or, in the absence of a single leader, a council of religious leaders. The constitution stipulates that this national religious leader or members of the council of leaders are to be chosen from the clerical establishment on the basis of their qualifications and the high esteem in which they are held by Iran's Muslim population. This leader or council appoints the six religious members of the Council of Guardians (the six lay members--lawyers--are named by the National Consultative Assembly, or Majles); appoints the highest judicial authorities, who must be religious jurists; and is commander-in-chief of the armed forces. The Council of Guardians, in turn, certifies the competence of candidates for the presidency and the National Assembly.

The president of the republic is elected by universal suffrage to a 4-year term by an absolute majority of votes and supervises the affairs of the executive branch. The president appoints and supervises the Council of Ministers (members of the cabinet), coordinates government decisions, and selects government policies to be placed before the National Assembly.

The National Assembly consists of 290 members elected to a 4-year term. The members are elected by direct and secret ballot. All legislation from the assembly must be reviewed by the Council of Guardians. The Council's six lawyers vote only on limited questions of the constitutionality of legislation; the religious members consider all bills for conformity to Islamic principles.

In 1988, Ayatollah Khomeini created the Council for Expediency, which resolves legislative issues on which the Majles and the Council of Guardians fail to reach an agreement. Since 1989, it has been used to advise the national religious leader on matters of national policy as well. It is composed of the heads of the three branches of government, the clerical members of the Council of Guardians, and members appointed by the national religious leader for 3-year terms. Cabinet members and Majles committee chairs also serve as temporary members when issues under their jurisdictions are considered.

Judicial authority is constitutionally vested in the Supreme Court and the four-member High Council of the Judiciary; these are two separate groups with overlapping responsibilities and one head. Together, they are responsible for supervising the enforcement of all laws and for establishing judicial and legal policies.

The military is charged with defending Iran's borders, while the Revolutionary Guard Corps is charged mainly with maintaining internal security. Iran has 28 provinces, each headed by a governor general. The provinces are further divided into counties, districts, and villages.

POLITICAL CONDITIONSIran's post-revolution difficulties have included an 8-year war with Iraq, internal political struggles and unrest, and economic disorder. The early days of the regime were characterized by severe human rights violations and political turmoil, including the seizure of the U.S. embassy compound and its occupants on November 4, 1979, by Iranian militants.

By mid-1982, a succession of power struggles eliminated first the center of the political spectrum and then the leftists, leaving only the clergy. There has been some moderation of excesses both internally and internationally, although Iran remains a significant sponsor of terrorism.

The Islamic Republican Party (IRP) was Iran's dominant political party until its dissolution in 1987; Iran now has no functioning political parties. The Iranian Government is opposed by a few armed political groups, including the Mojahedin-e-Khalq (People's Mojahedin of Iran), the People's Fedayeen, and the Kurdish Democratic Party.

ECONOMYPre-revolutionary Iran's economic development was rapid. Traditionally an agricultural society, by the 1970s, Iran had achieved significant industrialization and economic modernization. However, the pace of growth had slowed dramatically by 1978, just before the Islamic revolution.

Since the revolution, increased government involvement in the economy has further stunted growth. Iran's current difficulties can be traced to a combination of factors. Economic activity, severely disrupted by the revolution, was further depressed by the war with Iraq and by the decline of oil prices beginning in late 1985. After the war with Iraq ended, the situation began to improve: Iran's GDP grew for 2 years running, partly from an oil windfall in 1990, and there was a substantial increase in imports.

A decrease in oil revenues in 1991 and growing external debt, though, dampened optimism. In March 1989, Khomeini had approved Rafsanjani's 5-year plan for economic development, which allowed Iran to seek foreign loans. But mismanagement and inefficient bureaucracy, as well as political and ideological infighting, have hampered the formulation and execution of coherent economic policies. Today, Iran's economy is a mixture of central planning, state ownership of oil and other large enterprises, village agriculture, and smallscale private trading and service ventures. President Khatami has continued to follow the market reform plans of former President Rafsanjani and has indicated that he will pursue diversification of Iran's oil-reliant economy, although he has made little progress toward that goal.

Official unemployment was estimated to be 14% for 1999. Although Islam guarantees the right to private ownership, banks and some industries--including the petroleum, transportation, utilities, and mining sectors--were nationalized after the revolution, although Iran has been pursuing some privatization. (Oil price and debt problems are no longer relevant.) The import-dependent industrial sector is further plagued by low labor productivity, lack of foreign exchange, and shortages of raw materials and spare parts.

Agriculture also has suffered from shortages of capital, raw materials, and equipment, as well as from the war with Iraq; in addition, a major area of dissension within the regime has been how to proceed with land reform.

FOREIGN RELATIONSKhomeini's revolutionary regime initiated sharp changes from the foreign policy pursued by the Shah, particularly in reversing the country's orientation toward the West. In the Middle East, Iran's only significant ally has been Syria, but Iran has made great strides in improving relations with its Gulf neighbors, particularly Saudi Arabia. Iran's regional goals are dominated by wanting to establish a leadership role, curtail the presence of the U.S. and other outside powers, and build trade ties. In broad terms, Iran's "Islamic foreign policy" emphasizes:

Vehement anti-U.S. and anti-Israel stances;

Eliminating outside influence in the region;

Support for Muslim political movements abroad; and

A great increase in diplomatic contacts with developing countries.

Despite these guidelines, however, bilateral relations are frequently confused and contradictory due to Iran's oscillation between pragmatic and ideological concerns.

The country's foreign relations since the revolution have been tumultuous. In addition to the U.S. hostage crisis, tension between Iran and Iraq escalated in September 1980, when Iraq invaded Iran. Much of the dispute centered around sovereignty over the waterway between the two countries, the Shatt al-Arab, although underlying causes included each nation's overt desire for the overthrow of the other's government. Iran demanded the withdrawal of Iraqi troops from Iranian territory and the return to the status quo ante for the Shatt al-Arab as established under the 1975 Algiers Agreement signed by Iraq and Iran. After 8 punishing years of war, in July 1988, Iran agreed to UN Security Council Resolution 598, which called for a cease-fire. The cease-fire was implemented on August 20, 1988; neither nation had made any real gains in the war.

Iran's relations with many of its Arab neighbors have been strained by Iranian attempts to spread its Islamic revolution. In 1981, Iran supported a plot to overthrow the Bahraini government. In 1983, Iran expressed support for Shi'ites who bombed Western embassies in Kuwait, and in 1987, Iranian pilgrims rioted during the Hajj (pilgrimage) in Mecca, Saudi Arabia. Nations with strong fundamentalist movements, such as Egypt and Algeria, also mistrust Iran. Iran backs Hizballah, Hamas, the Palestinian Islamic Jihad, and the Popular Front for the Liberation of Palestine-General Command--all groups violently opposed to the Arab-Israeli peace process.

Relations with west European nations have taken a turn for the better with Iran attempting to present itself as a more reliable partner in diplomatic and commerical affairs.

Iran maintains regular diplomatic and commercial relations with Russia and the former Soviet Republics . Both Iran and Russia believe they have important national interests at stake in developments in Central Asia and the Transcaucasus, particularly on energy resources from the Caspian Sea. Russian and other sales of military equipment and technology concern Iran's neighbors and the United States.

Iran spends about 4% of its GDP on its military. Branches of its military include ground forces, a navy, an air force, and Revolutionary Guard Corps. The Iran-Iraq war took a heavy toll on these military forces. Iran is trying to modernize its military and acquire weapons of mass destruction; it does not yet have, but continues to seek, nuclear capabilities.

U.S.-IRANIAN RELATIONSOn November 4, 1979, militant Iranian students occupied the American embassy in Tehran with the support of Ayatollah Khomeini. Fifty-two Americans were held hostage for 444 days. On April 7, 1980, the United States broke diplomatic relations with Iran, and on April 24, 1981, the Swiss Government assumed representation of U.S. interests in Tehran. Iranian interests in the United States are represented by the Pakistani Government.

In accordance with the Algiers declaration of January 20, 1981, the Iran-U.S. Claims Tribunal (located in The Hague, Netherlands) was established for the purpose of handling claims of U.S. nationals against Iran and of Iranian nationals against the United States. U.S. contact with Iran through The Hague covers only legal matters.

Commercial relations between Iran and the United States are restricted by U.S. sanctions and consist mainly of Iranian purchases of food and medical products and U.S. purchases of carpets and food. The U.S. Government prohibits most trade with Iran.

There are serious obstacles to improved relations between the two countries. The U.S. Government defines five areas of objectionable Iranian behavior:

Iranian efforts to acquire nuclear weapons and other weapons of mass destruction;

Its involvement in international terrorism;

Its support for violent opposition to the Middle East peace process;

Its threats and subversive activities against its neighbors; and

Its dismal human rights record.

The U.S. believes that normal relations are impossible until Iran's behavior changes. However, the United States has offered to enter into dialogue with authorized representatives of the Iranian Government without preconditions. The Iranian Government has not accepted this offer. The United States has made clear that it does not seek to overthrow the Iranian Government but will continue to pressure Iran to change its behavior.